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Delivering the presidency budget speech, Zuma pointed
out that Eskom reduced its tariff hike for this year from 25.9%
to 16% thanks to government's decision to sacrifice a return of
R8bn.

"I had asked Eskom to explore possibilities in this
regard and they responded within a month. This will put more than R8bn back into the economy during the current year," he said.

"This approach will also inform Eskom's next price application -- which Eskom is now preparing."

The electricity utility is due to submit its next tariff application to the National Energy Regulator of SA, Nersa, in July.

But Eskom's finance chief Paul O'Flaherty noted last
week that the R8bn saving to consumers had been exhausted and that
the time had come to move to cost-reflective tariffs, suggesting
steeper increases.

He said when Eskom approached Nersa, it hoped to secure
an agreement firstly to extend the multi-year price determination
period to five years, and secondly to raise tariffs to levels where
production costs would be covered.

This was necessary to protect Eskom's credit rating to
enable it to keep borrowing money to complete its infrastructure
expansion programme.

O'Flaherty said the price needed to reach 90 cents per kilowatt hour in real terms in five years' time.

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